Everyone Else Is Renting Dollars

USDC, PYUSD, USDG and the next wave of stablecoins can pay for growth. But the real moat is what happens when the payments stop.

In September 2025, Hyperliquid set off the blockbuster bidding war in stablecoin history. The prize: the USDH ticker and the $5.5B of deposits behind it (7.5% of all USDC), generating more than $200M a year in Treasury yield. Paxos bid 95% of the yield back to the platform; Frax and Agora bid 100%. Ethena bid 95% and added $75M in incentives. For a week it looked like the deal that would elevate Ethena into the majors.

But, in the end, the vote went another direction. USDH went to Native Markets, a brand-new team that had submitted an application within 90 minutes of the ticker’s announcement and offered the worst revenue split of anyone: 50%.

8 months later USDH was dead, stalled near $100M beside $5B of untouched USDC. In May 2026 Coinbase bought the remains, became Hyperliquid’s USDC treasury deployer, and agreed to pass “the vast majority” of reserve yield to the protocol. In the grand tradition of blockbuster financial deals, this one ended sad, confusing, and with only a slight modification of the status quo.

The result was simple, the big guys won. Circle and Coinbase had the liquidity, the trust, the exchange integrations, and the redemption infrastructure that $5B of trading collateral requires; even with insiders’ blessing, Native Markets just couldn’t compete.

While it’s easy to call this whole story an irrelevant bit of insider lore, it also serves as a good metaphor for the entire stablecoin market. The bigger you are, the easier it is to grow and the harder you are to replace. The worth of a dollar is measured by the places that will accept it; every integration and every holder makes the next one cheaper to win.

Float (supply, TVL, etc.) is the whole business. Every stablecoin in circulation is an interest-free loan from its holder: the issuer deploys that capital into productive investments and generates yield. Ideally, an issuer would love to keep all of those proceeds, but most have to share them with venues and users to keep and grow deposits.

A moat, then, is measurable: how much of the yield can an issuer keep before the holder decides to switch? Where the float is replaceable (a treasurer rotating reserves, an exchange swapping its default coin) the answer is almost none; the yield gets paid away just to keep the deposits. And then, there’s Tether.

Tether keeps essentially all of it, on $184B of float, paying nobody, through 12 years of attempts to displace it.

The difference is who holds the float, and why.

Who Keeps the Yield

Ranked by retention, the pattern is hard to miss.

At the bottom of the chart are coins held as some other product’s reserves, where the holder is a single professional. Ethena’s USDtb keeps roughly 90% of its backing in BlackRock’s BUIDL, a position that hangs on one allocation decision. Slots like these have been priced in public: Paxos once offered MakerDAO nearly half the Fed Funds rate to keep USDP in its reserves, and Maker zeroed the position within months anyway.

In the middle are coins that reach their holders through somebody else’s storefront. Circle retained about 41 cents of each revenue dollar last quarter: $407M of $694M went to distribution, on terms that give Coinbase 100% of reserve income on platform-held USDC and half the rest. More than a quarter of all USDC now sits inside Coinbase products. Circle’s stock trades about 78% below its post-IPO peak: the equity market converging on the same arithmetic. The consortium designs go further by construction: Paxos’s USDG redistributes more than 90% of reserve returns to partners, and Open USD, announced 3 days ago by 140+ companies from Visa to Google, promises members essentially all reserve economics minus a management fee.

At the top, alone, is Tether: roughly 100% retention on the market’s largest supply, $13B of profit in 2024.

Retention falls as holder sophistication rises. Treasurers, DAOs and exchanges rate-shop, so the yield flows to them or their agents. The question is why one issuer’s holders have never demanded to be paid.

Stress and Calm

Money rewards sameness and acceptance concentrates; nobody wants to hold 12+ kinds of dollars. The clearest way to see this is to watch where the money runs when something breaks.

Crypto has taken 5 system-wide blows since 2022:

• Terra’s collapse in May 2022
• FTX’s bankruptcy that November
• regulators halting Binance’s BUSD in February 2023
• USDC losing its peg during the Silicon Valley Bank failure a month later
• the leverage flush of October 2025

USDT’s share of stablecoin supply rose through every one of them. The 2 sharpest: BUSD’s halt took USDT’s share from 50.0% to 63.6% within 90 days, and in the week USDC broke the buck, $11B flowed into USDT while the overall market shrank. When UST’s algorithmic peg imploded, USDT paid out roughly $10B in 2 weeks, dipped to about $0.95, and was back at peg within days.

Calm markets run the other way: USDT’s share drifts down. USDT doesn’t shrink, its rivals just grow faster. It held 85% of the market in mid-2020 and only 44% by mid-2022, and the compliant-era boom has pulled it from 70% to under 60% while USDC grew 28% in a year.

But look at how the challengers grow when they grow. Coinbase pays about 4% on USDC in its products, and its own earnings materials name USDC rewards the largest driver of expense growth. PayPal’s PYUSD fell 31% when its incentive rates tapered. That kind of share is rented: it arrives when the payments start and it leaves when they stop.

USDT’s share is different in kind; nobody is renting it. When Castle Island and Artemis surveyed real-world stablecoin payments, the volume ran through USDT held by people no one compensates. Liquidity tracks the same split: depth follows where the uncompensated holders already are. And even as USDT’s market share fell 10 points, its supply grew from $113B to $184B.

Still, an obvious question: if rivals can outgrow Tether for a sustained amount of time, how long until one actually replaces it? The closest precedent says the wait is measured in decades. The American economy passed Britain’s in the early 1870s, yet the dollar did not overtake sterling until the mid-1920s, and sterling remained a major reserve currency into the 1950s.

Incumbent money outlives its fundamentals, because displacement requires the world to change its habits, not just its portfolio.

Don’t Trust, Can’t Verify

The uncomfortable truth is that despite being the issuer with the deepest measured moat, Tether is also the least verified financial institution of its size on earth. But every once in a while, we get glimpses inside the machine.

And what we see isn’t pretty.

In 2019, after an $850M shortfall was covered from Tether’s reserves, its own general counsel told a New York court the coin was backed “approximately 74 percent”.

In 2021 the New York Attorney General settled for $18.5M, barring the companies from doing business with New Yorkers, and said the claim of full backing “was a lie.” The same year the CFTC fined Tether $41M after finding its reserves sufficient “for only 27.6% of the days” in the 26 months sampled.

For years the backing included billions in commercial paper from issuers Tether never disclosed; their identities emerged only in June 2023, through documents it had fought to keep sealed.

And in March 2026 the company announced its first engagement for a full audit, reportedly with KPMG; 12 years in, none has ever been completed. Its claimed 585 million users are, like its reserves, the company’s own figure.

If holders priced verification, that record would show in the flows. The chart above shows the opposite: in every stress event, money ran toward the unaudited issuer. Money works when nobody has to ask questions about it; disclosure gives questioners something to run with.

We can see this effect in action during USDC’s March 2023 run. Everyone could see exactly where Circle held reserves and therefore exactly how much was at risk at the failing banks; USDC’s discount reflected the exact proportion of backing in danger.

Tether trutherism is probably overblown and definitely outdated. Tether has passed every live redemption test, and its profits are large enough to have filled legacy holes. Its attestations show $141B of Treasuries behind an $8.2B buffer. And despite all of the smoke, USDT is the only asset that’s been proven to hold up even in the worst fire.

But still… there’s something uncomfortable about Tether. Even outside observers can understand the risks of a firm sitting at the center of a financial system with so many dangerous open questions, but there is a particular irony given the industry that birthed stablecoins. One of crypto’s core pillars is transparency, yet the industry has produced one of the largest opaque financial institutions in the world.

The discomfort cannot be separated from the moat. A holder base that stays through open questions about solvency is a holder base that will never leave over basis points.

The Retention Test

So, which stablecoins have defensible moats?

A stablecoin held as another product’s reserves keeps almost nothing, because its entire position can be moved in one meeting. Driving distribution through platforms requires paying incentives, and those incentives are limited by the yield the issuer can generate with its deposits.

When the next coin launches behind a wall of partner logos, the useful question is what retention it could sustain if the incentives stopped tomorrow. Subsidies can buy any amount of supply; Do Kwon, UST and Anchor Protocol can attest to that.

All stablecoins are shaped by this dynamic, including USDC (Circle only keeps 41% of its revenue)… all except USDT.

USDT is special. It has transcended the stablecoin category and achieved the coveted status of money. Store of value. Medium of exchange. Unit of account.

When a stablecoin becomes money, it doesn’t need to pay any incentives at all. People don’t hold money because they are incentivized. And so, a stablecoin that achieves money status has a new moat, and the revenue earned can be entirely captured.

And it takes very, very long to displace money.

But it’s not impossible; money is not forever. USDT is not eternal. Two macro forces will test the current dynamic.

The first is rates, where exposure is asymmetric. Tether’s income fell from $13B in 2024 to $1.04B last quarter. Looks bearish… until you compare against the competition. Every challenger strategy above commits to giving away 90% or more of a shrinking yield.

Coinbase grew USDC balances 55% to a record $19B while its stablecoin revenue stayed flat. Rewards budgets, consortium splits and auction bids are paid from the same declining spread; unsubsidized float costs nothing to keep. Tether banked the high-rate years; its rivals contractually distributed them as they arrived.

The second is the state, the only force with a track record of displacing incumbent money. The GENIUS Act so far has cut the other way: identical mandated reserves and a yield ban standardized American challengers while leaving the offshore leader out of scope (in 2028, US platforms can no longer offer non-compliant coins to US persons; Tether’s USAT, a compliant US sibling, offers a path forward). A hard partition of the compliant and offshore markets is one outcome that could destabilize the status quo… but it wouldn’t affect the dynamics that brought us here.

But, for now, USDT is the only onchain money we’ve got access to; everything else is a money-like product whose issuers must spend aggressively to maintain it. The moat is defined both by the amount the issuer is spending and by the amount it is earning.

A coin held as someone else’s reserve is one decision from leaving, and a coin that reaches its holders through a platform belongs, economically, to the platform. Stablecoins that pay people to stay last as long as the payments.

The only deep moat yet observed in stablecoins is to become money.

Good luck.